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What’s happening: The euro surged to a one-month high on Monday, after US President Donald Trump announced a delay in European Union tariffs.
What happened: Trump backed down from a planned 50% tariff on EU exports to the US starting June 1, after talking with European Commission President Ursula von der Leyen.
The US dollar continued to decline versus major peers as investors remain concerned about Trump’s policy reversals and tax-cut bill.
Why it matters: Last Friday, Trump said that trade talks with the EU were not going anywhere and threatened to impose 50% tariffs starting June 1. However, on Sunday, Trump said he is delaying his decision to impose tariffs on EU until July 9 after a phone call with the EC President, who asked for more time to reach a deal.
The greenback has remained under pressure in recent months, provided a boost to other major currencies.
The European Central Bank President Christine Lagarde said that the euro could become an alternative to the greenback in case governments are able to strengthen the region’s financial and security foundation. “The euro will not gain influence by default – it will have to earn it,” she added.
The greenback now represents 58% of international reserves, the lowest in several decades, but is still much higher than the euro’s share of 20%.
Investors remain concerned about the economic outlook of the Eurozone, with the EC slashing its 2025 growth outlook to 0.9%. The recent PMI data indicated that private sector activity moved back into the contraction zone in the Eurozone, following a sharper decline in the services sector due to downbeat domestic demand.
Meanwhile, the European Central Bank is projected to lower interest rates at its upcoming meeting in June.
The EUR/USD forex pair surged to 1.1418 on Monday, hitting its highest level since April 29. The pair pared some gains later during the session. The European common currency has gained around 10% year to date against the US dollar.
What to watch: Investors await the release of economic data on the Eurozone’s economic sentiment (1300 UAE Time), consumer confidence (1300 UAE Time) and consumer inflation expectations (1300 UAE Time) today. Eurozone’s economic sentiment indicator, which declined to 93.6 in April, is expected to rise to 94 in May.
Analysts expect the consumer confidence indicator to improve to -15.2 in May, from -16.6 in the previous month, while consumer confidence price trends are projected to increase to 30.6 points in May, from 29.6 points in April.
Context: Equity markets in the US closed lower on Friday after President Donald Trump proposed 50% tariffs on EU goods.
Details: Trump threatening to impose 50% tariffs on imports from the European Union exerted pressure on US stocks on Friday. However, he announced a delay in tariffs on Sunday, extending the deadline to July 9.
US markets remained closed on Monday for the Memorial Day holiday and are expected to open on a strong note today driven by the tariff pause announcement.
Apple’s shares fell to a two-week low on Friday, after Trump warned of imposing 25% tariffs on iPhones sold in the US but not manufactured domestically.
Meanwhile, Deckers Outdoor’s stock tanked nearly 20% after the company issued a weak sales forecast for the fiscal first quarter.
All three main indices closed the week on a lower note, shedding more than 2%.
The Dow Jones index dipped by 256 points, or 0.61%, to close at 41,603.07, while the S&P 500 declined 0.57% to settle at 5,802.82 on Friday. The Nasdaq 100 tumbled 0.93% to finish at 20,915.65.
Information technology, communication services and consumer discretionary stocks were among the worst performers on Friday. Utilities and consumer staples bucked the overall market trend to close the session higher.
What to watch: Investors await the release of economic data on US durable goods orders (1630 UAE Time), S&P/Case-Shiller home price index (1700 UAE Time) and CB consumer confidence (1800 UAE Time) today. New orders for manufactured durable goods in the US, which surged by 7.5% in March, are expected to decline by 7.9% in April.
Analysts expect the S&P CoreLogic Case-Shiller 20-City home price index to increase by 4.5% year-over-year in March, while the CB consumer confidence index is projected to climb to 87.2 in May, from 86 in the previous month.
Other Markets: Asian indices traded mixed this morning, with Japan’s Nikkei 225 and China’s Shanghai Composite Index down by 0.27% and 0.05%, respectively, and Hang Seng Index up by 0.3%.
The head of Ukraine’s foreign intelligence service said that they have data to confirm that China is supplying materials and equipment to Russia’s military factories. The news sent the RUB/USD pair lower in forex trading this morning.
South Korea’s Composite Consumer Sentiment Index jumped to 101.8 in May, from 93.8 in the previous month. The region’s consumer confidence hitting its strongest level since October 2024 lent support to the KRW/USD forex pair.
The Bank of Israel maintained its benchmark interest rate at 4.5% at its May meeting, sending the ILS/USD pair lower in forex trading this morning.
Brazil’s current account deficit shrank to $1.347 billion in April, from $1.723 billion in the year-ago period, lending support to the BRL/USD forex pair.
China’s industrial profits grew 1.4% year-over-year to 2,117.02 billion yuan during the first four months of the year, following a 0.8% gain in the January–March period. Despite this, the CNY/USD pair fell in forex trading this morning.
Eurozone’s industrial sentiment (1300 UAE Time), selling price expectations (1300 UAE Time) and services sentiment (1300 UAE Time), Italy’s 10-year BTP€i auction (1310 UAE Time), 15-year BTP€i auction (1310 UAE Time) and 2-year BTP short term auction (1310 UAE Time), France’s unemployment benefit claims (1400 UAE Time) and jobseekers total (1400 UAE Time), UK’s CBI distributive trades (1400 UAE Time), Spain’s business confidence (1500 UAE Time), Brazil’s IPCA mid-month CPI (1600 UAE Time), Canada’s wholesale sales (1630 UAE Time), as well as US non defense goods orders (1630 UAE Time), FHFA house price index (1700 UAE Time), Dallas Fed manufacturing index (1830 UAE Time), 3-month bill auction (1930 UAE Time), 6-month bill auction (1930 UAE Time), 2-year note auction (2100 UAE Time) and money supply (2100 UAE Time).
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